This report is the result of SDI's
extensive market and company research covering the Kenyan defense industry, and
provides detailed analysis of both historic and forecast defense industry
values including key growth stimulators, analysis of the leading companies in
the industry, and key news.

Key Features and Benefits

* The report provides detailed
analysis of the current industry size and growth expectations from 2014to 2018,
including highlights of key growth stimulators, and also benchmarks the industry
against key global markets and provides a detailed understanding of emerging
opportunities in specific areas.

* The report includes trend analysis
of imports and exports, together with their implications and impact on the
Kenyan defense industry.

* The report covers five forces
analysis to identify various power centers in the industry and how these are
expected to develop in the future.

* The report allows readers to
identify possible ways to enter the market, together with detailed descriptions
of how existing companies have entered the market, including key contracts,
alliances, and strategic initiatives.

* The report helps the reader to
understand the competitive landscape of the defense industry in Kenya. It
provides an overview of key defense companies, both domestic and foreign,
together with insights such as key alliances, strategic initiatives, and a
brief financial analysis.

Key Market Issues

Kenya stands as one of the countries
that encounter high levels of corruption in virtually all sectors of business
activity. According to Transparency International's Corruption Perceptions
Index 2013, Kenya is classified as a highly corrupt country. Corruption within
the country has engraved itself in various forms ranging from bureaucratic and
political affairs and misappropriation of public resources to fraud
transactions related to state assets. To tackle the situation, the government
formed the Kenya Anti-Corruption Commission (KACC), which was disbanded and
replaced by the Ethics and Anti-Corruption Commission in 2011.

During the forecast period, Kenya is
expected to invest US$5.5 billion in its armed forces, of which US$0.9 billion
is forecast to be on the acquisition of military hardware, offering foreign
OEMs limited opportunities to cater to the Kenyan defense industry. Although
the allocation is higher than that of the review period, when it was US$0.6
billion, the budget still remains highly inadequate for the procurement of
high-tech defense equipment. Furthermore, the country is expected to focus more
on developing its economic conditions and bring in more wealth and prosperity
for its people in the coming years. These factors do not make the Kenyan
defense market an attractive investment destination for foreign companies.

Key Highlights

Kenya has been involved in a border
dispute with Somalia over the last couple of years with Somali militant groups
operating in Kenya's remote and barren North Eastern Province. Counties in the
Kenyan region such as Wajir, Isiolo, and Mandera remain exposed to chronic
instability making it difficult for local communities to lead a peaceful life.
In 2010, extremist group Al-Shabaab attacked a Kenyan border patrol in Liboi,Lagdera.
To combat such violent outbreaks, the Kenyan Defence Forceswaged a military
operation against Al-Shabaab in southern Somalia and took control of certain
Somali regions as well as some Kenyan territories including Ijara, Garissa, and
Liboi. Tensions between the two neighboring nations heightened in 2012
following the discovery of offshore oil and gas deposits in East Africa, with
both countries claiming to have ownership over the water zone. Furthermore,
Kenya shares a long-standing strained relationship with South Sudan over the
disputed land of IIemi Triangle in East Africa. During the forecast period,
Kenya's efforts to strengthen its border security are expected to lead to the
procurement of advanced surveillance technology and equipment including
unmanned aerial vehicles (UAVs) and scanners as well as better military
training sessions.

Kenya has one of the highest
instances of human trafficking in East Africa and is on the Tier 2 Watch List
for human trafficking. Neighboring countries such as Somalia, Ethiopia, South
Sudan, Uganda, and Tanzania are from where the victims are sought and
trafficked. While men and women are trafficked for the purpose of forced labor
and the sex trade, children are exploited for domestic servitude, forced labor
in agriculture, cattle herding, begging, and bars attendance. The country also
acts as a transit point through which Chinese, Indian, and Pakistani women are
taken to European countries to be pushed into illicit activities. Over the
forecast period, the government is expected to invest in strengthening its
border security via the procurement of surveillance and monitoring equipment,
both on land and along the coast, to control such activities.

Kenya's domestic defense industry is
not able to fulfill much of its requirements and the country therefore relies
on imports from foreign original equipment manufacturers (OEMs) to satisfy the
demand for military modernization. During the period 2010-2012, Kenya displayed
a fluctuating level of imports. In an attempt to enhance the capabilities of
its armed forces, Kenya is expected to import defense equipment such as
helicopters, armored vehicles, and UAVs during the forecast period. Kenya
currently does not export arms as the domestic defense industry is
under-developed, but this trend is not expected to change over the forecast
period.